No, it is not advisable to change your valuation and financial models at this time based solely on the potential for tax law changes. During the NACVA 2024 Business Valuation & Financial Litigation conference last week in Las Vegas, Carla Nunes and Jim Harrington, both with Kroll, pointed out that the uncertainty surrounding future tax policies makes premature adjustments risky and potentially inefficient.
Wait it out: While some provisions, such as the treatment of R&D expenses or bonus depreciation, may have bipartisan support and are more likely to pass, others—such as changes to corporate tax rates or global tax rules—are less predictable. Making changes now in your models could result in inaccurate projections and require further revisions later, leading to wasted time and resources.
A better idea is to maintain your current models while closely monitoring developments in tax legislation. Scenario analysis can be a valuable tool during this period of uncertainty, allowing you to prepare for a range of potential outcomes without committing to changes prematurely. This approach, while costly and time-consuming, provides flexibility and readiness to adapt once new laws are enacted. Waiting until the specifics of the tax changes are “signed on the dotted line” ensures that your models remain accurate and actionable.
We’ll have more from the NACVA conference in the next issue.